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ERP Implementation Risk Management Part III: Executive Engagement

Senior executive engagement is always listed as high on the critical success factors of any ERP implementation project.   Often times, how this engagement should manifest itself in the execution of the program is unclear.   Here is the simple answer: Risk Management.

Good program management practices in risk management focuses teams on the following two aspects: treating risks that they can control and working on contingency plans for risks that are uncontrollable. It has also been demonstrated that people are more likely to accept risks they view as controllable and voluntary.  It then stands to reason that by increasing the span of controllable risks there is a higher probability of overall program success.  This expansion of control can be realized through exercising the appropriate level of executive engagement.  In this post, we will look at some of the nuances of structurally engaging stakeholders / executives in the execution of the program risk management processes.

First, let’s define the characteristics of a stakeholder as individuals or organizations:

•             That stands to gain or lose through the success or failure of the project

•             Provides funding for the project

•             Participates in or has invested resources in the project

•             Is affected by the outputs or outcomes of the project

•             Is in the “chain of accountability”

In the case of an ERP implementation this typically involves the COO, CFO, and the CIO.  By this broad definition we will also bring the Software Provider and the primary system integrator into the mix.  It should be noted that these players also fairly represent the five risk effect areas and five sources of risk outlined in ERP Implementation Risk Management Part II: The Silver Bullet. Before getting into the specific methods to involve stakeholders, I first need to get into three specific problems that need to be overcome.

Problem #1:  Differing organizational nomenclature and business area understanding.   Integrating the organization typically means bringing together areas of the business that have largely remained as functional silos.   These islands of operation develop a language of their own and tend to be motivated by different performance measures.   Consider the discussion measuring the potential impact of a go-live, attempting to balance the priorities between a timely closing of the books and making a major shipment to a critical customer as promised.   Now add an IT professional that is attempting to explain risk associated with cloud computing and you have all the conditions necessary to create the proverbial tower of babble.

Problem #2:  Risk evaluation is fundamentally subjective.  Risk assessments depend on the judgment of experts.   Experts whose theoretical models are filled with assumptions and biases.

The question becomes “who do you trust?”.

Problem #3: Stakeholders do not benefit equality from the identification of risk.   To understand these problems simply consider the scenario of the Systems Integrator that is attempting to land the big contract.   The SI is out to win the business, so limiting the discussion to what is easily controllable puts them into a better position to win the deal.

To address these problems we will introduce two additional risk management imperatives:

Imperative Number 1:  Utilize a knowledgeable impartial facilitator to engage stakeholders in a risk evaluation workshop. A well-managed session will enhance the risk management process by influencing/ synchronizing the stakeholder’s perception and making them more conscious of the context of their responsibilities in mitigation. This is often times referred to as “attention shaping”.

Stakeholders should emerge with a new appreciation of other stakeholder interests, business constraints and a new awareness of common interests that did not previously exist. The identification of common objectives is also critically important in fostering a sense of collective responsibility and collaboration between the key stakeholders involved facilitated session.  We are broadening the scope of the controllable risks in effect.

A facilitated session should have 3 primary goals:

A.            To influence individual perceptions or risk.  By creating a greater awareness of risks and the controllability of risks, stakeholders should develop a greater acceptance or risk, increased trust in other stakeholders, and an understanding of what commitment on their part is required to mitigate risks.

B.            Synchronization of perception. Through the sharing of concerns and the clarification of expectations and potential dangers, stakeholders should come to a shared perception of risks and a collective understanding of the actions required to mitigate.

C.            Improved probability of affective mitigation efforts. Actions developed in these sessions foster both a collective and individual ownership of the mitigation activities.  Clear priorities can be established that will enhance the speed and quality of future decision making.

A well facilitated session will typically identify as a primary mitigation of risk as the assignment of the appropriate talent to the program.  We have discussed this subject in previous blog posts so it will come to no surprise to those that have been following along.

What I want to explore now is the idea of full-time vs. part-time assignment to the team, while it is abundantly clear that user involvement in design, testing, and deployment is critical to the success of the program.  It has not been well documented why full time organizational assignment is beneficial in achieving the goals of the enterprise.    Recent project team productivity studies have shown that full time assignments provide three benefits:

1.            Individuals are more likely to focus on the total business case. Freed from the organizational structure of their previous department, individuals are more likely target benefits and risks that pertain to the entire organization vs. what is specifically in it for their department.  Therefore, increasing the probability of program payback.

2.            Increased sense of ownership of delivery.  Studies have shown that individuals that are organizationally assigned to project teams tend to take actions to improve the delivery process and more aggressively move to mitigate risks.   Part time resources or full time resources assigned to the project, but not organizational moved, tend to follow the process, but if something goes wrong with the process claim no ownership.  They in effect “let the process happen”.

This leads to are next point:

Imperative Number 2:  Executives should demonstrate commitment to the effort, and increase the probability of success through the organizational assignment of top talent to the project.

Senior Executives and stakeholders are recognized as being a critical component of success to any broad based ERP or IT enabled transformation initiative.  Executives can demonstrate their support and commitment to their own people and the rest of the organization by taking ownership of risk.

In the next installment of this series we will dive deeper into the biases that surface in risk management and how to reduce the impact.


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